Slump in house price increases and number of property sales |
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Mon, 20 Jun 2005 12:05
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LONDON: Property prices in the U.K. have slumped with the annual increase in rates showing the lowest percentage since 2001 -- 2.4 per cent -- according to a report on property website Rightmove. The asking prices of properties did, however, go up by 0.2 per cent for May-June period, the effect of this was of course to slow down the number of sales.
Unsold houses are piling up in the registers of estate agents, the report said. Simplified, it seems that for some considerable time now sellers have and are overvaluing their properties, whether their own doing or on estate agents advice.
There does seem to be a refusal to accept reality when it comes to lowering asking prices in relation to basic market forces, simple supply and demand but this is put down by some to the massive borrowing that took place against positive equity as prices rose over the past 5 years; this means that owners simply cannot afford to drop their prices for fear of a debt black hole. Buyers on the other hand, in particular first time buyers, cannot afford to get on the property ladder and now fear of prices dropping means that many don't want to just yet - result - stalemate.
This stalemate looks like lasting some considerable time, unless there are changes in the market or intervantion by the BoE. Gordon Brown did his bit last month to try and prop up house buyer confidence the housing market by announcing affordable first time buyer homes via shared equity; announced to a fanfare the pros and many cons were discussed and enthusiasm or hype was short lived, no doubt to be raised again at a later date, after the finances have been resolved with the lenders covering the scheme and when the publicity may have more of an effect on the market.
Some good news, for the first time in a years salary increases do seem to be catching up with property price increases...
| Rightmove's commercial director, Miles Shipside said, "Having had it so good for many years, it's now payback time for the property market. Wages have failed to keep up with the increase in house prices. "As many sellers are refusing to part with gains they have made, buyers are forced to make up the affordability gap. The reality is it will take seven years of static house prices and wage inflation to bridge this affordability gap."
The number of properties available to buyers went up to 73 from 70 per estate agent. The report said there is hardly any encouraging response from first time buyers, who constituted a major chunk of property buyers in the past years. The average home is now available for an asking price of 198,642 pounds.
Meanwhile, in a related development, Bank of England has come out with a report saying if the number of sales of homes fall by 100,000, there will be only a 0.9 per cent drop in annual spending on household and audio-visual items. A slow housing market can have only a moderate effect as movers constitute a small portion of home owners.
The bank said 47 per cent of people moving house bought new white goods like freezers, compared with 19 per cent of other householders.
The property market in the U.K. is worth $5.7 trillion. Officially, there are 17.6 million homeowners in Britain, or about 30 per cent of the population.
Rightmove had compiled the data by averaging the asking prices of 145,964 homes put up for sale between May 8 and June 13, or more than half the market.
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